The most significant economic initiative in Southeast Asia is the ASEAN Free Trade Area (AFTA). Currently the main implementation arrangement is the Common Effective Preferential Tariff, where members charge uniform and low tariffs to imports from other members. According to this brief (PDF), average tariff within the ASEAN is below 4%. Most products have a tariff of 5%. (Certain sensitive products, comprising about 1% of the total number of products, are permanently excluded from CEPT and free trade). Ultimately the goal is elimination of all customs duties by 2010.
Following the establishment of the AFTA, "trade among ASEAN countries has grown from US $ 44.2 billion in 1993 to US $ 95.2 billion in 2000, representing an average annual increase of 11.6 percent. As of the year 2000, intra-regional exports made up about 23.3 percent of total ASEAN exports. Before the financial and economic crisis struck in mid-1997, intra-ASEAN exports had been increasing by 29.6 percent. This is significantly higher than the rate of increase of total ASEAN exports, which grew at 18.8 percent during the same period." Currently intra-ASEAN exports account for 22% of all ASEAN exports.
Lots more need to be done for full economic integration. Some heavily regulated products require mutual recognition of standards before being freely imported. A perfect example is pharmaceuticals. I would love to see recognition of safety and efficacy standards in the rest of Southeast Asia, where medicines tend to be much cheaper, by 40 to 70 percent, than in the Philippines. This is anti-poor, anti-rational, an outrage. Importation, even just within ASEAN, should be deregulated starting now . Expect lies, damn lies, and statistics to be dished out by the powerful pharmaceutical lobby to oppose this, the way they opposed the Generics Drug Law back in 1988.
Another problem is the movement of persons. While short-term visits are visa-free, there remain quite stringent barriers to intra-regional employment. There are working groups within ASEAN actively looking into promoting labor market integration.
Once these obstacles have been hurdled, what next? Following the EU example, ASEAN may adopt a common currency. Aside from reducing transaction costs within the region, a common currency would make monetary policy uniform, perhaps improving the investment climate; it would also force fiscal discipline on the member states. This is decades from now, but hey the EU was 40 years in the making.
The ASEAN economy is simply the way to go.